The new moralists

In his latest column in the NYT, Paul Krugman rails against the new generation of moral preachers who feel debtors must suffer for their "sins".  Meanwhile, the entire economy remains sluggish to the point of recession again as these same debtors continue to reign in the spending which drives output.  As Krugman puts it, "your spending is my income and my spending is your income".  When either side of the equation is low, both sides suffer.  As millions of underwater homeowners cut spending to pay debt, the economy suffers.   The new moralists are unmoved by the suffering the world is enduring in the name of moral rectitude.  Similar medicines were prescribed after WW1 in England and a decade later the country was still struggling.  The real cure would be debt forgiveness, but around the world, powerful interests are lined up against anything which fails to punish those who in many cases got in over their heads with the active assistance of the same banks which now insist on repayment in full.   As Krugman suggests, another recession may force a reexamination of this policy, but don't count on it.